The essay that follows is adapted from the transcript of a keynote address I delivered on September 26, 2019.
We have gone, as a species, through a number of transformative technological revolutions. Domesticating plants and animals set the stage for sedentary agricultural societies. The industrial revolution put us on the path of mass urbanization and the digital revolution currently under way could usher in transformation of the same order of magnitude as the ones that preceded. What this will ultimately look like, nobody knows. But the dynamics at play are worth thinking about.
Whatever your views may be on globalization, one thing is certain: Technology has played a key enabling role in its spread. If you doubt this, consider call centers servicing clients around the world from locations such as India or the Philippines. Would something like that be possible without broadband fibre optics communications that allow a person at one end of the world to talk to you in real time as if he or she was in your own city? Indeed, there could have been no globalization without transportation being what it is today, without communications being what they are today. There is obviously a feedback loop between the two but technology has been driving globalization, as opposed to the other way around. Ground all airplanes, replace them with horse-drawn buggies and suddenly, your world becomes a much smaller place.
This is change on a global scale and change of this magnitude, of course, is highly disruptive and has a way of leaving some behind. When such people take to the streets – or the ballot box – against globalization or in favor of the way “things used to be”, what they have in mind is the way things were in the golden decades (from their standpoint) that followed World War II, when a strong manufacturing-based economy gave people with basic education access to a good middle class life. Many of those jobs have gone and with or without globalization, they are likely never coming back.
As technology evolved, we initially saw jobs going overseas as a result of labour cost arbitrage. A hardening of borders and a more restrictive trade environment may well bring some manufacturing production back, but a resurgence of employment in the manufacturing sector is unlikely. The reason, of course, is that improvements in robotics and automation allow companies to generate a given level of output with a fraction of the people that used to be required on those assembly lines. So you can roll back globalization, but because of technology, it doesn’t mean that you’re rolling back the impacts of globalization, which supports the point of course that technological change is the major force behind the disruptive trends that we have been observing.
This is not just true of manufacturing and you should not feel overly secure just because you happen to exercise some kind of professional occupation. The first jobs that got automated were indeed manufacturing jobs, but automation is now going up the knowledge chain.
We’re not about to see self-driving cabs in our streets – that’s probably tens years away or more – but some highly specialized knowledge fields are already seeing signs of disruption.
In medicine, for instance, there are now deep learning systems that are better at spotting tumors than an oncologist or a radiologist might be. There is something deeply unsettling about this – about a machine being better at a task that has been the exclusive purview of what many of us think of as the most qualified and celebrated professionals that society has to offer. Will doctors, including specialists, be replaced by machines? During your lifetime, there will probably still be a doctor looking at your X-rays or MRI, but are we going to need as many doctors if the algorithms are, 9 out of 10 times or 99 out of 100 times, better than a human at spotting whatever we are looking for?
I do not believe however that human doctors are about to disappear, for the same reasons that human-centered occupations of the same nature will also endure. The way those professionals do their job, however, will probably change considerably.
As a case in point, let’s look at the wealth management industry – the one I’m most familiar with. Some of the day to day activities of financial advisors are unlikely to be replaced by machines but others, I would argue, can easily be replicated by algorithms and, potentially, be done better and more efficiently by machines. I’m thinking here of repetitive analytical tasks such as individual portfolio construction and rebalancing for instance, which can easily be outsourced to “at scale” utilities or delegated to algorithms.
Some of the other things that financial advisors do, on the other hand, are much harder for a machine to replicate: Sitting down with a human being to have a conversation about goals and aspirations; reassuring that person during down markets, giving that person, in the form of judicious advice, gentle nudges to help him or her achieve better outcomes so that he or she “will be all right”.
Indeed, I’ve been telling advisors for years now that they have to carefully pick the hill that they’re going to defend. If you’re an advisor and pick to fight on a hill that the machines are uniquely skilled at climbing – to defend an activity that algorithms are going to be better at than you –, well, you could well meet your professional end on that hill.
Rather than defending an indefensible position, you may want to pick a hill that the machines have no special ability to climb, and this, I believe, is the realm of human-centered interactions. Humans being the social creatures they are, interpersonal relationships matter and at the end of the day, humans, I believe, will still want to deal with other humans when it comes to the most important decisions in their lives. Human financial advice, like medecine, has a long and bright future ahead of it but advisors will need to be very, very careful about which hill they choose to retrench themselves on.
This is a trend that we are seeing all across. Jobs that are likely to be taken over are jobs that are repetitive in nature and that are mostly analytical in nature, while jobs that are harder to replace with machines are the ones that involve things like creativity and innovation, interpersonal relationships and emotional intelligence, because we are social creatures and still need to interact with other humans. That, in any event, is the ground I’ve personally decided to stake.
Now let’s move on to the economic environment, another important cause of disruption. We know that, typically, strong economic growth has come hand in hand with strong demographic growth. People who decide to form a new household and start a family are going to be buying a new fridge and a new stove and maybe a car and a car seat and things of that nature. More humans means more needs to fill. Demographics drive economic growth.
In many if not all developed countries, we are now experiencing demographic trends going the other way, and this has a lot of important implications. Economic growth in developed economies is probably now on a long-term, much more subdued trend than what we’ve seen over the past few decades. The fact that the economic backdrop is going to be more subdued – less buoyant than it was for many, many decades – will mean more difficult times for many people.
Not all people of course. People with the right skills in the right fields will likely do extremely well. Many others however may not fare as well and many more may fear losing their footing and being left behind.
As a result of the various trends we have been discussing, we can already observe a resurgence of populism and nationalism around the world. I say ‘resurgence’ because it’s easy to forget that populism and nationalism – common reactions to globalization and the reduction of economic opportunities – were also ascendent in the first decades of the 20th century.
We should also keep in mind that historically, the middle class has been the driver of political stability in liberal democracies, but when the middle class has felt under threat, it has not always supported democracy and free markets. When it feels threatened and exposed, the middle class is just as likely to veer to the left than to the right and we are, right now, in a period where the middle class, in many countries, is feeling more exposed than it has in a long time.
In reaction to this, governments can be tempted to intervene to restore balance. Business leaders, for their part, look at those trends and can see that the waters are getting more tumultuous. Prudent business leaders, seeing such trends developing and feeling the pervasive mood, may be tempted to implement preemptive measures. If you’ve been following the news, you are familiar by now with the recent reversal by the U.S. Business Roundtable of its historical support of shareholder primacy in favor of the more balanced notion of stakeholder primacy: the idea that businesses have clients and employees and shareholders, and that their respective needs and interests need to be appropriately balanced.
Businesses, as I have often said, are not disconnected from the broader social fabric. Businesses are granted a social license, a license that allows them to offer valuable products and services and in the process, generate profits. But this license comes with implicit conditions and as change rocks the status quo and risks leaving many behind, those conditions must be kept in mind for the sake of fostering the kind of benign environment that supports successful and inclusive economic activity.
Technological change, demographic trends, subdued economic growth, a souring public mood and increased government interventionism… All of these dynamics hang inextricably together. As we move forward, we must keep a vigilant eye on such trends and make, in our own best interest, collective choices that allow more rather than less of us to thrive during this period of deep transformation.